By: Evan M. Sauer
On June 22, 2016, the Chicago City Council voted 43-7 to enact an ordinance amending Titles 2, 3, 4 and 17 of the Municipal Code regarding Shared Housing Units and Vacation rentals (the “Shared Housing Ordinance” or “SHO”). Chicago Mayor Rahm Emanuel signed this legislation on June 24, 2016, and the Shared Housing Ordinance was published in the City Council Journal of Proceedings on July 20, 2016 at pages 27714 through 27770.
The Shared Housing Ordinance is divided into several primary sections. This blog will discuss the changes that were made to some of the pertinent provisions governing vacation rentals in Chicago. License Application
The new regulations regarding vacation rentals are similar to, but significantly less burdensome upon hosts, than the regulations for shared housing units. A vacation rental owner must submit an application (for a license, not a registration). This application requires that the vacation rental owner make significant disclosures, such as the owner’s name, address, the nature of the property, identification of a local contact person, an attestation that the vacation rental is a lawfully established dwelling unit, an attestation that vacation rental use is not prohibited by HOA bylaws or lease restrictions, and attestations regarding the primary residence and “max caps” for certain types of buildings. Maximum Number of Vacation Rentals
Probably the most drastic revision to the Shared Housing Ordinance is the restriction imposed on the number of vacation rentals that can be licenses in a multi-unit building.
2-4 Unit Buildings
. If the dwelling unit is located in a building containing two to four dwelling units, inclusive, the Shared Housing Ordinance requires that the dwelling unit: (i) is the applicant's or licensee's primary residence; and (ii) is the only dwelling unit in the building that is or will be used as a vacation rental or shared housing unit, in any combination. If the dwelling unit is not the applicant's or licensee's primary residence or is not the only dwelling unit in the building that is or will be used as a vacation rental or shared housing unit, in any combination, the Shared Housing Ordinance requires the following in order to operate a legal vacation rental: (a) a commissioner's adjustment under Section 4- 6-300(1), or (b) the applicant or licensee, as applicable, held a valid vacation rental license, as of June 22, 2016, for the dwelling unit.
5 or More Unit Buildings
. if the dwelling unit is located in a building containing five or more dwelling units, no more than six dwelling units in the building, or one quarter of the total dwelling units in the building, whichever is less, can be used as vacation rentals or shared housing units, in any combination. Operational Requirements
The Shared Housing Ordinance enumerates specific legal duties of a vacation rental owner, that largely track the legal duties for shared housing hosts. For example, the requirements to obtain insurance, maintain current guest registration records, print and display the licensee’s license number in all advertisements, provide clean linens and sanitized pots, post the licensee’s license near the rental entrance, post an evacuation diagram inside the entrance door, comply with all food handling codes and ordinances, if the licensee “provides food to guests,” notify the police of any suspected criminal activity, comply with all smoke and carbon monoxide detector laws and ordinances, comply with all tax laws, provide certain disclosures to the guests, ban on the ability of an owner to “serve or otherwise provide alcohol to any guest”, and the prohibition on hourly rentals. Also, vacation rental owners are required to list their license number in their listing (along with other descriptive information, such as ADA accessibility). A licensed “vacation rental” is now deemed a “public accommodation.” Penalties
Operating a “vacation rental” without a license is now subject to a minimum fine of $2,500 per day per violation, and the failure to include a license number in a listing “shall create a rebuttable presumption that the business of vacation rental is being operated without a license.” Evan M. Sauer is a Chicago real estate and business attorney at Reda & Des Jardins, LLC a forward-thinking, technologically savvy law firm providing top-notch legal services to clients ranging from startups to large companies in a variety of industries. R&D's practice includes business, real estate, litigation and estate planning.